Community property in Arizona explained

In a previous blog, titled How to Take Title to a Vacation Property in Arizona, we touched on the different types of ownership available to spouses in Arizona. In that blog, the concept of community property was briefly described. In this entry, we will spend more time discussing what exactly community property is, and some of the unique implications this ownership concept can have on the vacation home owner.

First, Arizona is one of nine community property states, along with California, Washington, Nevada, New Mexico, Idaho, Louisiana, Idaho, Texas and Wisconsin, which have a statutory system in place that establishes a community property ownership structure. For spouses there are two types of property community property or separate property. Community property will be owned equally by the spouses. Separate property will be the property of only one spouse. Under Arizona law, all property (both real and personal) that this acquired by either the husband or the wife during the marriage is community property, except for property that is (i) acquired by gift (even from the other spouse), devise (through a will or trust) or descent (through the probate of a person who died without a will).

Vacation home owners who purchase property will need to consider community property, as Arizona law provides that property which is purchased in Arizona during marriage by persons married outside Arizona, who move into Arizona later, will be controlled by Arizona law. You may unwittingly have ownership rights in property they never intended to have. Spouses may disclaim a community property interest in property through the execution and recording of a Disclaimer Deed.

All property that the spouses owned before marriage will remain separate property after they are married (this also includes the increase, rents, issues and profits of the separate property), unless that property is comingled or converted to community property. This can be accomplished in numerous ways adding separate property cash to a community bank account; transferring title of a separate property piece of real estate to both spouses, etc. In addition to a community property interest in property, there is also a community property interest in debts. Either spouse may bind the community property interest, except that both spouses must both agree to purchase real property, lease real property for a year or longer, or provide a guaranty or indemnity. Separate property of a non-debtor spouse will not be liable for the separate debts of the debtor spouse.

Community property of the debtor spouse will be liable for the separate debts of the debtor spouse, but only to the extent of the debtor spouse's one-half interest in the community property. For vacation home owners, the community property is liable for a spouse's debts incurred outside Arizona, during the marriage which would have been community debts if incurred in Arizona. If you have questions about community property, a potential move to Arizona, or the purchase of Arizona real property, you may reach Jeffrey G. Baxter, licensed in Iowa and Arizona, by email at jbaxter@dickinsonlaw.com.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.